Alexander van der Lof, CEO of technology company TKH: “In this first half year we have seen a strong increase in demand for almost all of our activities, resulting in a very high order intake of € 937 million (H1 2020: € 668 million) and an increase in order book of 49%. Order intake grew especially in tire building, machine vision, energy connectivity systems (including subsea) and specialized connectivity systems.
With the more focused strategic direction, our strong innovative power and a large number of new contracts signed, we are well positioned to boost our performance amidst the post-COVID-19 recovery. The ‘Simplify & Accelerate’ program, as introduced in 2019, is on track, and we expect to finalize our divestment program within the next twelve months. The share buyback program of the first quarter of this year underlines our strong financial position.
The realization of a ROS of 13.4% in the second quarter shows that TKH makes good progress towards the ROS-target of 15%. Our business fundamentals provide a strong basis for organic growth and value creation.”
Financial developments first half
The turnover in the first half of the year increased with € 46.9 million (6.9%) to € 725.8 million (H1 2020: € 679.0 million). Higher raw materials prices had an upward impact of 2.6% on turnover, while exchange rates had a negative impact of 1.2%. Divestments had a downward impact of 0.3%. On balance, TKH recorded a 5.8% organic growth in turnover.
The gross margin decreased to 48.2% (H1 2020: 49.0%) due to a shift in product mix with a larger share in connectivity combined with an increase in raw material prices.
Operating expenses increased by 0.6% compared with the first half of 2020. As a percentage of turnover, operating expenses decreased to 36.6% in the first half of 2021, from 38.8% in the first half of 2020. The implemented integrations and cost savings accounted for a significant share of the relative reduction of costs. At the same time, selling expenses were still at a lower level due to the COVID-19 restrictions. Depreciation came in at € 22.1 million, € 0.8 million below the level in the first half of 2020, mainly due to a lower depreciation on the right-of-use assets.
The operating result before amortization of intangible assets and one-off income and expenses (EBITA) increased by 22.3% to € 84.4 million in the first half of 2021, from € 69.0 million in the first half of 2020. All Solutions contributed to the increase, with the EBITA in Telecom, Building and Industrial Solutions increasing by 17.1%, 32.0% and 3.3% respectively.
ROS increased to 11.6% in the first half of 2021 (H1 2020: 10.2%) due to the turnover growth and a lower relative cost level, with a very strong recovery in Q2. ROS increased in all three Solution segments.
Amortization decreased, as the amortization on certain PPA’s from past acquisitions have ended.
The financial result declined by € 2.3 million, mainly because in the first half of 2020 a profit of € 5.5 million on divestments was included. In H1 2021, foreign exchange results and results from associates improved.
The normalized effective tax rate increased to 27.1% in the first half of 2021, from 26.2% in the first half of 2020, primarily due to higher profits at companies that are charged at higher tax rates.
Net profit from continued operations before amortization and one-off income and expenses attributable to shareholders increased by 37.5% to € 49.4 million (H1 2020: € 36.0 million). Net profit increased by 51.4% to € 40.2 million (H1 2020: € 26.6 million).
Net debt, calculated in accordance with the bank covenants, increased compared to year-end 2020 by € 13 million to € 275 million. The increase is mainly related to dividends paid combined with the share buyback program. This was offset partly by the positive results and a decrease in working capital. On 30 June 2021, working capital as a percentage of turnover was at 11.2%, lower than on 30 June 2020 (16.6%). Last year, the percentage increased due to the postponement of the delivery of various projects within Industrial Solutions. This effect has phased out. Prepayments on the high order intake in Industrial Solutions and some temporary deferral of vat and wage tax payments lowered working capital.
The Net debt/EBITDA ratio stood at 1.5 at end-June 2021, well within the financial ratio agreed with the banks. Solvency amounted to 40.3% (H1 2020: 40.5%).
The number of permanent employees (FTEs) stood at 5,647 at 30 June 2021 (end 2020: 5,583 FTEs). In addition, TKH had 304 temporary employees at 30 June 2021 (end 2020: 121).
Developments per Solution segment
Telecom Solutions encompasses the core technologies connectivity and vision & security. TKH develops, produces, and supplies systems ranging from basic outdoor infrastructure for telecom and CATV networks through to indoor home networking applications. Around 40% of the portfolio consists of optical fibre and copper cable for hub-to-hub connectivity. The remaining 60%, consisting of components and systems in the field of connectivity and peripherals, is deployed primarily in network hubs – share in turnover 15%.